corddigital Economies of scale & economies of scope | CORD Digital Blog

Economies of scale 

This refers to the accumulated volume in production and sales which occurs decreasing the cost price per unit due to the experience curve and increased efficiency in a lot of factors such as production, marketing, and other factors. The global presence has a significant effect on extending the firm’s scale of operations by giving the firms a large capacity in production as well as large asset base. From this point we can say that; through scale, the firm could create competitive advantage but in case if the firm converts the scale into economies of scale, to make the idea more clear we can describe some benefits from economies of scale:

  • Decreasing the operating cost per unit as well as spreading the fixed costs over larger volume due to experience curve effect 

  • Pooling global purchasing support the firm and provide an opportunity to concentrate global purchasing power over suppliers and which lead to volume discounts and reducing the transaction cost 

  • Increase the talent of the members within the firm 

    1. From this point we’ll move to the other side, Economies of scope to explain more the idea of the relationship between economies of scale and scope to the marketing and supply chain management. 


    2. Economies of scope 

      First let’s say the economies of scope happens, when the firm is serving in diverse marketplaces in the world, simply the global scope can’t take place in case the firm is serving a customers in just one country, customers should purchase a bunch of identical products and services across diverse countries and they can bring those products either from a horde of global suppliers or a single global supplier (international marketer) that are presents in all of the markets which the firm is already serving customers within. From this point we can conclude that compared with a horde of local suppliers and a single global supplier (marketer) can lead to increase the value for the global customer among the consistency in the product’s quality and features as well as in the services across countries, here we can conclude the importance of the integration between marketing and supply chain management within professional supply chain network across the countries. As well as the importance of local marketing talents.

      The challenging in capturing the economies of scope within the global level lies in the quick response from the firm on the tension between two factors: The need for central coordination of most elements on the marketing mix and the need for local autonomy in the actual delivery of products and services. As the adaptation approach is Highly required in today’s business; The multinational firms which are serving a lot of different customers in different countries across the world, would gain benefits from the concept of economies of scale and scope through transferring the experience that gained from one country to another country in terms of similarity in culture, customers characteristics and business environment. From this point, we can conclude that if the firm is concerning to improve the local marketing talent in different nations, it can exploit the experience which the marketer gained and use it in another country that shares a similar culture, customer characteristics, and business environment. 

Read more about The importance of the strategic integration between Marketing & SCM


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